“The latest reduction by the IMF in the outlook for global growth released overnight is a disturbing reinforcement of the accumulating headwinds facing Australian businesses, the jobs market and households,” Ai Group Chief Executive, Innes Willox said today.
“The slowing global outlook is exacerbated by distinct risks in the domestic economy stemming from contraction in the construction sector and patchiness across the services and manufacturing sectors. The ongoing drought is also impacting on sentiment. These factors are adding to a well-entrenched mood of consumer caution linked to our relatively high household indebtedness.
“While recent reductions in lending rates and stimulus from the first phase of the income tax cuts are helping, the weight of anecdotal evidence, business surveys and official data are increasingly suggesting a further slowing is ahead.
“Our economy needs a spark to regain momentum and rebuild confidence to combat the local and international pressures which are a drag on business and consumer confidence.
“It is time for Australia’s governments – at the federal, state, territory and local levels – to work more effectively together to impart a more active stimulus than is currently in the pipeline. There is a clear place for a sensible acceleration of ‘shovel-ready’ infrastructure investment and public works. There is also a strong case to closely consider bringing forward the scheduled program of income tax relief.
“With the release this week of the World Economic Forum’s Global Competitiveness Index showing a further slippage in Australia’s competitiveness ranking, it is also becoming clear that government’s need to act on measures to make it easier, not harder, for businesses to invest in plant, equipment, research and development and skills.
“The development of a coherent national agenda to boost Australia’s productivity is essential to drive our growth over the long term.
“Further, there is no question there is more to be done in the national task of long-term fiscal consolidation.
“However, more immediately, with rising risks of a loss of momentum in the labour market and in view of the protracted nature of the task of reversing rises in unemployment, more active provision of fiscal stimulus is increasingly looking like a sensible precautionary spark.
“It is better that we start now before an acceleration of rises in rates of unemployment and underemployment sets in,” Mr Willox said.